Learn about savings and checking accounts and sign-up bonuses for opening a new account.
The Top Line
● Bank accounts are one of the most essential assets that you will have in your financial life.
● There are several types of bank accounts to choose from ranging from long-term savings accounts to easy-to-access checking accounts.
● Choosing your bank account should be taken seriously as it has financial ramifications and is one of the accounts that you will be using on a daily basis.
● Many banks offer sign-up bonuses and other ongoing incentives. It is best to be aware of these so that you can take advantage of any promotions that might come up.
Bank Accounts Overview
If you want to have any kind of financial life, then one of the assets that you will definitely need is a bank account. There are several types of bank accounts that you can open, but the most common is a checking account. With a checking account you will be able to patronize businesses, send payments, write checks, and pay your bills. It is one of the most essential accounts that you will have throughout your life. Despite this, not everyone knows exactly how to open a bank account or the best steps to ensure you get the best deal when you open a bank account.
This complete guide is going to show you everything you need to know about opening a bank account whether you are looking to learn in preparation for your first time opening an account or you want to begin pursuing account incentives for opening a new bank account after many years of being an account holder. With this knowledge in hand, you will be well-positioned to find the bank account that works best for you and your needs.
What is a Bank Account?
To start with the most simple concept, a bank account is an account that you have with a financial institution that represents an agreement for you to store money in their possession. Through this arrangement, both parties are able to gain some benefit. For you, a place will be gained to store your money that is safe, secure, and provides you with easy and regular access. This is a far cry from storing money under your mattress.
If you earn an income, you can have your checks deposited directly to your bank account to make the process of payroll as easy as ever. You can usually access your bank account through an online portal or even an application to make it easier than ever to store and access your money.
In addition to the convenience and safety that you get when you store your money in a bank, many banks also provide you with a minimal interest rate to compensate you for allowing them to use, lend, and invest your stored finances.
For the bank, they are able to benefit by using the money that is stored with them to lend it out and earn interest on loans. For this privilege, they pay the account holder a minimal amount of interest, typically.
Types of Bank Accounts
Another piece of information that you will need to know before you open a bank account is that there are many different types of bank accounts. Though there are a wide variety of bank accounts available to you, undoubtedly the two most common types of bank accounts are checking accounts and savings accounts. With one of each of these in your possession, you are well-poised to manage your money in an efficient and responsible way. Here is a bit more information about each account and the benefits that they are able to provide.
As you can tell from the name, savings accounts are often accounts that don’t get touched all that often, except to deposit funds. They are primarily used as accounts for you to build up money and save within so that you don’t spend the money. Savings accounts vary when it comes to fees, but they are generally very low or free. Some savings accounts, called high-yield savings accounts, can provide you with two percent interest or more. You may withdraw or transfer money from a savings account up to six times per month.
Checking accounts are a bit tougher to know just by looking at the name of the account. These are accounts that are connected to your checkbook and your debit card. Whenever you purchase something using your debit card or checkbook, it will be debited from a checking account. Checking accounts are used primarily for purchases and to store any money that you will be needing somewhat soon.
Money Market Accounts
Money market accounts combine characteristics of savings accounts and checking accounts. With money market accounts, you tend to earn a higher interest rate like a savings account but you may also write checks from the account and access money with a debit or ATM card. Like a savings account, you are also limited to six withdrawals or transfers per month.
How to Open a Bank Account
Opening a bank account is quite simple and easy. There are thousands of banks both online and at physical locations that you can go to if you want to open a bank account. You should identify which bank account works best for you before you go to open your account. Gather your necessary documents such as past bank statements, utility bills or other proof of address, and picture identification. You will need these and a way to fund your account if you want to open a bank account. Work with an in-person teller or an online portal to fill in the details and get your bank account.
Bank Account Rewards
One of the greatest aspects of bank accounts is that if you meet their criteria, many of them offer great benefits and account rewards. You can earn cash back, airline miles, or large cash bonuses by signing up for a bank account and using direct deposit or committing to using your debit card a certain number of times each month. Before you choose a bank account, you should do some research on the current best bank account bonuses available.
Costs of a Bank Account
For most bank accounts, you will find that there is no upfront fee to open the bank account if you are able to meet a low minimum deposit. This entices people to open up bank accounts and makes it easier than ever, but you should also know that there could potentially be fees associated with your bank account that aren’t classified as an upfront fee or purchase price.
Bank accounts often have in the fine print that if you are unable to maintain a minimum balance or use your debit card more than a specified amount of times each month, they may impose a fee on your account. Whenever you commit to opening a bank account, you should read the terms and conditions and find out when and if you will be charged.